<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
HARSCO CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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<PAGE> 2
LOGO
NOTICE OF
1998 MEETING
AND PROXY
STATEMENT
<PAGE> 3
LOGO
HARSCO CORPORATION
P.O. Box 8888
Camp Hill, Pennsylvania 17001-8888
March 23, 1998
To Our Stockholders:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders of
your Company, which will be held on Wednesday, April 29, 1998, beginning at 10
a.m. at the Radisson Penn Harris Hotel and Convention Center, Camp Hill,
Pennsylvania.
Information about the Annual Meeting, including a listing and discussion of the
various matters on which you, as our stockholders, will act, may be found in the
formal Notice of Annual Meeting of Stockholders and Proxy Statement which
follow. We look forward to greeting as many of our stockholders as possible.
Whether you plan to attend the Annual Meeting or not, we urge you to fill in,
sign, date and return the enclosed Proxy Card, in the postage-paid envelope
provided, in order that as many shares as possible may be represented at the
Annual Meeting. The vote of every stockholder is important and your cooperation
in returning your executed Proxy promptly will be appreciated.
Sincerely,
LOGO
D. C. Hathaway
Chairman and Chief
Executive Officer
<PAGE> 4
HARSCO CORPORATION
P.O. Box 8888
Camp Hill, Pennsylvania 17001-8888
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Harsco Corporation will be held on
Wednesday, April 29, 1998, at 10 a.m. at the Radisson Penn Harris Hotel and
Convention Center, Camp Hill, Pennsylvania to consider and act upon the
following matters:
1. Election of four Directors to serve until the 2001 Annual Meeting of
Stockholders, and until their successors are elected and qualified;
2. Considering and voting upon the approval of a proposed amendment to the
1995 Executive Incentive Compensation Plan and reapproval of related Plan
terms;
3. Considering the approval of the appointment by the Board of Directors of
Coopers & Lybrand L.L.P. as independent accountants to audit the financial
statements of the Company for the fiscal year ending December 31, 1998;
and
4. Such other business as may properly come before the Annual Meeting.
The Board of Directors has fixed the close of business on March 6, 1998, as the
record date for the determination of stockholders who are entitled to notice of,
and to vote at, the Annual Meeting and at any adjournments thereof. The polls
will open at 9:30 a.m. on the date of the Annual Meeting and will close at
approximately 10:15 a.m. Proxies will be accepted continuously from the time of
mailing until the closing of the polls.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON ARE
REQUESTED TO FILL IN, DATE, SIGN AND MAIL THE ENCLOSED FORM OF PROXY IN THE
ENVELOPE PROVIDED, TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED
STATES.
By Order of the Board of Directors,
LOGO
Paul C. Coppock
Senior Vice President, Chief Administrative Officer,
General Counsel and Secretary
March 23, 1998
<PAGE> 5
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement has been prepared in connection with the solicitation
by the Board of Directors of Harsco Corporation, a Delaware corporation (the
"Company"), of Proxies in the accompanying form to be used at the Annual Meeting
of Stockholders of the Company, to be held April 29, 1998, or at any adjournment
or adjournments of such Annual Meeting.
The record date for stockholders of the Company entitled to notice of, and
to vote at, the Annual Meeting is the close of business on March 6, 1998. On the
record date, there were issued and outstanding 46,747,743 shares of the
Company's common stock, $1.25 par value (the "common stock"). This figure does
not include 19,134,504 shares reacquired and held by the Company as treasury
stock which will not be voted. All such shares are one class, with equal voting
rights, and each holder thereof is entitled to one vote on all matters voted on
at the Annual Meeting for each share registered in such holder's name. The
presence, in person or by proxy, of a majority of the issued and outstanding
shares of common stock is necessary to constitute a quorum at the Annual
Meeting. Assuming that a quorum is present, the affirmative vote by the holders
of a plurality of the shares cast at the Annual Meeting will be required to act
on the election of directors. Assuming that a quorum is present, the affirmative
vote of the holders of at least a majority of the outstanding shares of common
stock of the Company entitled to vote present in person or by proxy, will be
required with respect to a proposed amendment to the 1995 Executive Incentive
Compensation Plan, the appointment of Coopers & Lybrand L.L.P. as independent
accountants for the current fiscal year and on all other matters to come before
the Annual Meeting.
In certain circumstances, a stockholder will be considered to be present at
the Annual Meeting for quorum purposes but will not be deemed to have cast a
vote on a matter. Such circumstances exist when a stockholder is present but
specifically abstains from voting on a matter or when shares are represented at
the Annual Meeting by a proxy conferring authority to vote only on certain
matters ("broker non-votes"). In conformity with Delaware law, abstentions and
broker non-votes will not be treated as votes cast with respect to election of
directors, and therefore will not affect the outcome of such matter. With
respect to the proposed amendment to the 1995 Executive Incentive Compensation
Plan and with respect to each other matter presented at the Annual Meeting,
abstentions will be treated as negative votes on such matters, while broker
non-votes will not be counted in determining the outcome.
The shares of common stock represented by each properly executed proxy
received by the Board of Directors will be voted at the Annual Meeting in
accordance with the instructions specified therein. If no instructions are
specified, such shares of common stock will be voted FOR the election of
nominees for Directors, FOR the adoption of a proposed amendment to the 1995
Executive Incentive Compensation Plan and reapproval of related Plan terms and
FOR the adoption of the appointment of Coopers & Lybrand L.L.P. as independent
accountants for the current fiscal year. The Board of Directors knows of no
other business to come before the Annual Meeting. However, if any other matters
are properly presented at the Annual Meeting, or any adjournment thereof, the
persons voting the proxies will vote them in accordance with their best
judgment. Any proxy may be revoked by notifying the Secretary of the Company in
writing at any time prior to the voting of the proxy.
The principal executive offices of the Company are located at 350 Poplar
Church Road, Wormleysburg, Pennsylvania (mailing address: P.O. Box 8888, Camp
Hill, Pennsylvania 17001-8888). This Proxy
1
<PAGE> 6
Statement and accompanying Notice of Meeting and form of Proxy are first being
mailed to stockholders on or about March 23, 1998.
ELECTION OF DIRECTORS
The Company currently has ten Directors, of whom four have a term of office
which will expire at the 1998 Annual Meeting. The Company's By-laws authorize
the Board of Directors to fix the number of Directors from time to time,
provided that such number will not be less than five nor more than twelve. In
accordance with the By-laws, the Board of Directors has fixed the number of
Directors at ten.
At the 1986 Annual Meeting of Stockholders, a classified Board was adopted
and elected by the Company's stockholders. Under this system, the Board of
Directors is divided into three classes. One class is elected each year for a
three-year term. The class whose term will expire at the 1998 Annual Meeting of
Stockholders consists of four Directors. The stockholders are asked to vote FOR
Messrs. Campanaro, Kirk, Marley and Scheiner, all of whom have been duly
nominated by the Board of Directors, upon the recommendation of the Nominating
Committee, to serve a term of office until the 2001 Annual Meeting of
Stockholders and their respective successors have been elected and qualified.
However, should any nominee become unavailable or prove unable to serve for any
reason, Proxies will be voted for the election of such other person or persons
as the Board of Directors may select to replace such nominee. No circumstance is
presently known which would render any nominee named herein unavailable to
serve.
Each person named as a nominee for Director has advised the Company of his
willingness to serve if elected. The information set forth below states the name
of each nominee for Director and of each Director continuing in office, his or
her age, a description of present and previous positions, the year in which he
or she first became a Director of the Company, business experience, other
directorships held and the Committees of the Board on which the individual
serves.
The Board of Directors met eight times during the fiscal year ended
December 31, 1997. Each of the Directors of the Board attended at least 75% of
the meetings of the Board and all Committees on which the Director served,
except J.E. Marley who attended 73% of such meetings.
NOMINATING COMMITTEE
The Nominating Committee recommends periodically to the Board prospective
Director candidates in light of resignations, retirements, or other changes in
the composition of the Board; proposes to the Board by January of each year a
slate of Directors for submission to the stockholders at the Annual Meeting; and
represents the Board in discussions with prospective Director candidates. At the
present time, the Nominating Committee will accept nominations only from
Directors and officers of the Company. The Nominating Committee met three times
in 1997.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
The Management Development and Compensation Committee administers the
Company's executive compensation policies and programs, advises the Board
concerning election of officers and executive salaries, and reviews and consults
with appropriate members of management with respect to organizational matters.
Areas of responsibility include, but are not necessarily limited to, planning
for management succession at the corporate and division level, particularly in
senior executive ranks, recommending to the Board the annual base salary of
corporate officers and division presidents, authorizing awards under the
Company's 1995 Executive Incentive Compensation Plan and advising the Board
regarding the
2
<PAGE> 7
institution or amendment of any incentive or contingent compensation plan
applicable to officers of the Company. The Management Development and
Compensation Committee met seven times in 1997. For additional information
regarding the policies and mission of the Compensation Committee see the "Board
Compensation Committee Report on Executive Compensation" which appears beginning
on page 9 of this Proxy Statement.
AUDIT COMMITTEE
The Audit Committee meets with members of management, the independent
accountants and internal auditors and reviews and approves the scope of audit
and non-audit services, reviews the results of the annual audit and any
accounting or disclosure questions encountered in the course of the annual audit
and reviews the adequacy of internal controls and other financial issues. The
Audit Committee met four times in 1997.
DIRECTORS' COMPENSATION
Non-employee Directors ("Outside Directors") of the Company currently
receive compensation of $25,500 per year plus $1,000 for participation at each
meeting of the Board and $900 for each committee meeting. Outside Directors who
are chairmen of Board committees receive additional compensation of $3,000 per
year. Certain Outside Directors also receive compensation for special
assignments in their capacity as Director at the rate of $900 per day.
Outside Directors are eligible to receive grants of nonqualified stock
options. Individuals who are Outside Directors on the first business day of May
of each year will automatically be granted on that date a nonqualified stock
option to purchase 2,000 shares of the Company's common stock at a price equal
to the market value on the date of grant. The Compensation Committee has no
discretion as to the eligibility, exercise price or size of awards to Outside
Directors. On May 1, 1997, the Company granted stock options in the amount of
2,000 shares each to the Outside Directors. The options permit the holders to
purchase shares at the price of $37.06 per share, exercisable in whole or in
part commencing one year after the date of grant and expiring on April 30, 2007.
The Company maintains a Deferred Compensation Plan for Non-Employee
Directors ("Deferred Compensation Plan") which allows each Outside Director to
elect to defer receipt of all or any portion of the director compensation until
a future date selected by the Director. The Director elects to hold the
accumulated deferred compensation in either an interest-bearing account or a
Harsco phantom share account. The interest-bearing deferred account accumulates
notional interest on the account balance at a rate equal to the five-year United
States Treasury Note yield rate in effect from time to time. Contributions to
the phantom stock account are recorded as notional shares of the Company's
common stock based upon the number of shares of common stock that compensation
payable on a given date would have purchased at the market price of the stock on
that date. Dividends that would be earned on the phantom shares are credited to
the account as additional phantom shares. All phantom shares are non-voting and
payments out of the account are made solely in cash based upon the market price
of the common stock on the date of payment. Under certain circumstances, the
accounts may be paid out early upon termination of directorship following a
change in control.
The Company had previously maintained a non-qualified pension plan for
Directors ("Directors' Retirement Plan"). In August 1996, the Board terminated
the Directors' Retirement Plan effective December 31, 1996 with respect to all
current and future Directors. The benefit obligations which had accrued as of
that termination date were paid out to the respective Directors in February
1997. At the election of each Director, the payment was in the form of cash,
phantom shares under the Deferred Compensation Plan, a donation to a charitable
contribution fund, or a combination of those alternatives.
3
<PAGE> 8
The terms of the Directors' Retirement Plan provided that members of the Board
who were not eligible for pension benefits resulting from employment with the
Company would be eligible after completion of five (5) years of service as a
Director to receive pension benefits upon retirement from the Board. A monthly
pension benefit equal to 60% of the monthly director's retainer in effect at the
time of retirement was to be paid to the Director for a period of months equal
to the number of whole months of service as a Director of the Company up to a
maximum of one hundred twenty (120) months. The monthly retainer does not
include meeting fees, chairmanship increments and fees. Directors who are
actively employed by the Company receive no additional compensation for serving
as Directors and by policy, the Company does not pay consulting or professional
service fees to Directors.
4
<PAGE> 9
NOMINEES FOR TERMS EXPIRING IN 2001
<TABLE>
<CAPTION>
DIRECTOR
POSITION WITH THE COMPANY OF THE
NAME AGE AND PRIOR BUSINESS EXPERIENCE COMPANY
---- --- ----------------------------- SINCE
<C> <C> <S> <C>
[L.A. Campanaro photo] 49 President and Chief Operating Officer since 1998
L. A. Campanaro January 1, 1998. Previously was Senior Vice
President and Chief Financial Officer from
April 1994, prior to which he served as Senior
Vice President-Finance from December 1992. Mr.
Campanaro joined Harsco in 1980 and served in a
number of financial, operating and general
management positions at three divisions during
a 10 year period as an officer, before
returning to the Corporate Office in 1992.
[R. L. Kirk photo] 69 Chairman of British Aerospace Holdings, Inc.; 1990
R. L. Kirk former Chairman and Chief Executive Officer of
CSX Transportation Inc. Mr. Kirk served as
Chairman and Chief Executive Officer of
Allied-Signal Aerospace Company from 1986 to
1989. He was President and Chief Executive
Officer of LTV Aerospace and Defense Company
from 1977 until 1986. He is also a Director of
First Aviation Services, Inc.
Member of the Nominating Committee.
[J. E. Marley photo] 62 Chairman of AMP Incorporated. Mr. Marley joined 1993
J. E. Marley AMP Incorporated in 1963 and was appointed
Corporate Vice President, Operations in 1983.
He became the company's President in 1986 and
assumed the position of President and Chief
Operating Officer in 1990. He is a Director of
AMP Incorporated and of Armstrong World
Industries, Inc.
Member of the Management Development and Com-
pensation Committee.
[J. I. Scheiner photo] 53 President and Chief Operating Officer of 1995
J. I. Scheiner Benatec Associates, Inc. He was President of
Stoner Associates, Inc. from 1988 to 1991 and
Vice President of Huth Engineers from 1987 to
1988. Served as Secretary of Revenue for the
Commonwealth of Pennsylvania from 1983 to 1987,
and from 1979 to 1983, served as Deputy
Secretary for Administration, Pennsylvania
Department of Transportation. He is a Direc-
tor of Pennsylvania National Bank, a member of
the Pennsylvania Chamber of Business and
Industry Board and a Trustee of Harrisburg Area
Community College.
Member of the Audit Committee.
</TABLE>
5
<PAGE> 10
DIRECTORS WHOSE TERMS EXPIRE IN 1999
<TABLE>
<CAPTION>
DIRECTOR
POSITION WITH THE COMPANY OF THE
NAME AGE AND PRIOR BUSINESS EXPERIENCE COMPANY
---- --- ----------------------------- SINCE
<C> <C> <S> <C>
50 Since 1996, President and Chief Executive 1998
[C. F. Scanlan photo] Officer of The Health Alliance of Pennsylvania
C. F. Scanlan and Executive Vice President and Chief
Operating Officer since 1995. President and
Chief Executive Officer of The Hospital and
Healthsystem Association of Pennsylvania since
1995. Executive Vice President of the
Healthcare Association of New York State since
1987.
Member of the Management Development and Com-
pensation Committee.
54 Mr. Sordoni is Chairman of Sordoni Construction 1988
[A. J. Sordoni, III Services, Inc. (construction management) and
photo] has been employed by that company since 1967.
A. J. Sordoni, III Mr. Sordoni is the former Chairman and Director
of C-TEC Corporation (telecommunications) and
Mercom, Inc. (cable television) and a past
Director of Pennsylvania Gas and Water Co. and
United Penn Bank.
Member of the Audit Committee, the Management
Development and Compensation Committee and the
Nominating Committee.
54 President and Chief Executive Officer of the 1986
[R. C. Wilburn photo] Colonial Williamsburg Foundation. Former
R. C. Wilburn President of Carnegie Institute and Carnegie
Library (educational and cultural complex)
located in Pittsburgh, Pennsylvania. From 1983
to 1984, Mr. Wilburn served as the Secretary of
Education for the Commonwealth of Pennsylvania.
From 1979 to 1983, Mr. Wilburn served as the
Secretary of Budget and Administration for the
Commonwealth of Pennsylvania. He is a Director
of Crestar Bank.
Chairman of the Nominating Committee; member of
the Audit Committee and Executive Committee.
</TABLE>
6
<PAGE> 11
DIRECTORS WHOSE TERMS EXPIRE IN 2000
<TABLE>
<CAPTION>
DIRECTOR
POSITION WITH THE COMPANY OF THE
NAME AGE AND PRIOR BUSINESS EXPERIENCE COMPANY
---- --- ----------------------------- SINCE
<C> <C> <S> <C>
[D. C. Hathaway photo] 53 Chairman and Chief Executive Officer. Was 1991
D. C. Hathaway Chairman, President and Chief Executive Officer
from April 1, 1994 to January 1, 1998.
President and Chief Executive Officer from
January 1, 1994 to April 1, 1994. Was President
and Chief Operating Officer of the Company from
May 1, 1991 to January 1, 1994. Served as
Senior Vice President-Operations from 1986 to
May 1991 and as Group Vice President from 1984
to 1986. Prior to 1984, was Chairman and Chief
Executive Officer of Dartmouth Investments
Limited in the United Kingdom which was
acquired by the Company in 1979.
Chairman of the Executive Committee.
[R. F. Nation photo] 72 Former President of Penn Harris Company 1983
R. F. Nation (hotel). Mr. Nation has been involved in a
variety of activities in community, state and
industrial areas.
Chairman of the Management Development and
Compensation Committee and member of the Execu-
tive Committee.
[N. H. Prater photo] 69 Retired President and Chief Executive Officer 1990
N. H. Prater of Mobay Corporation. Mr. Prater is a Director
of Koppers Industries, Inc. and Calgon Carbon
Corp. He serves as a trustee of the University
of Pittsburgh, Robert Morris College and as a
member of the International Advisory Board of
Georgia Institute of Technology.
Chairman of the Audit Committee; member of the
Management Development and Compensation Com-
mittee and member of the Executive Committee.
</TABLE>
7
<PAGE> 12
SHARE OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 6, 1998, information with
respect to the beneficial ownership of the Company's outstanding voting
securities, stock options and other stock equivalents by (a) each Director (b)
the Company's Chief Executive Officer and the Company's four most highly
compensated other executive officers (the "Named Executives") and (c) all
Directors and executive officers as a group. All of the Company's outstanding
voting securities are common stock.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF OTHER
NAME SHARES(1) EXERCISABLE OPTIONS(2) STOCK EQUIVALENTS
---- --------- ---------------------- -----------------
<S> <C> <C> <C>
L. A. Campanaro.............. 34,721 47,815 26,342(6)
P. C. Coppock................ 49,032(3) 70,134 15,964(6)
W. D. Etzweiler(4)........... 36,336 20,000 1,762(6)
S. D. Fazzolari.............. 11,254 24,000 20,154(6)
D. C. Hathaway............... 82,625 80,000 42,484(6)
R. L. Kirk................... 5,247 14,000 3,380(7)
J. E. Marley................. 500 10,000 3,765(7)
R. F. Nation................. 24,000 14,000 3,833(7)
N. H. Prater................. 2,000 6,000 4,241(7)
C. F. Scanlan................ 200 -0- -0-
J. I. Scheiner............... 3,026 6,000 405(7)
A. J. Sordoni, III........... 54,500(5) 18,000 -0-
R. C. Wilburn................ 800 14,000 -0-
All Directors and executive
officers as a group.
Excludes W.D. Etzweiler who
is retired. (12 persons in
total)..................... 267,905 303,949 120,568
</TABLE>
- - ------------
(1) Includes, for executive officers, restricted shares issued under the 1995
Executive Incentive Compensation Plan, which have voting power and are
subject to forfeiture under certain circumstances. Also includes, in the
case of Messrs. Campanaro, Coppock, Etzweiler, Fazzolari, Hathaway, and all
Directors and executive officers as a group, 10,783 shares, 9,139 shares,
18,484 shares, 7,372 shares, 17,953 shares and 63,731 shares, respectively,
pursuant to the Company's Savings Plan in respect of which such persons have
shared voting power.
(2) Represents all stock options exercisable within 60 days of March 6, 1998
awarded under the 1986 Stock Option Plan, the 1995 Executive Incentive
Compensation Plan and the 1995 Non-Employee Directors' Stock Plan.
Unexercised stock options have no voting power.
(3) Includes 18,480 shares owned by his wife as to which Mr. Coppock disclaims
beneficial ownership.
(4) Mr. Etzweiler retired from the Company effective March 1, 1998.
(5) Includes 13,000 shares owned by his wife and children as to which Mr.
Sordoni disclaims beneficial ownership.
(6) Includes stock options not exercisable within 60 days of March 6, 1998 and
non-voting phantom shares held under the Supplemental Retirement Benefit
Plan which will ultimately be paid out in cash based upon the value of
shares of common stock at the time of the payout.
8
<PAGE> 13
(7) Certain Directors have elected to defer a portion of their Directors' fees
in the form of credits for non-voting phantom shares under the terms of the
Company's Deferred Compensation Plan for Non-Employee Directors. These
amounts will ultimately be paid out in cash based upon the value of the
shares at the time of payout.
Except as otherwise stated, each individual has sole voting and investment
power over the shares set forth opposite his name. As of March 6, 1998, the
Directors and executive officers of the Company as a group beneficially owned
less than 1% of the Company's outstanding common stock.
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNER
Based on information contained on a Schedule 13G filed with the Securities
and Exchange Commission with respect to beneficial ownership at December 31,
1997, as of March 6, 1998, except as set forth below, no persons or group was
known by the Board of Directors to own beneficially more than 5% of the
outstanding voting securities of the Company.
<TABLE>
<CAPTION>
NAME AMOUNT
AND ADDRESS AND NATURE OF
TITLE OF OF BENEFICIAL BENEFICIAL PERCENT
CLASS OWNER OWNERSHIP OF CLASS
-------- ------------- ------------- --------
<S> <C> <C> <C>
Common Stock...................... FMR Corp. 5,038,800 10.45
82 Devonshire Street Sole Voting Power for
Boston, MA 02109 555,600 shares and
Sole Dispositive Power
for 5,038,800 shares
</TABLE>
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Management Development and Compensation Committee ("Compensation Committee"), a
Committee of the Board of Directors composed of the non-employee Directors
listed below this Report. The Company considers all of the members of the
Compensation Committee to be independent and none of these Directors have any
interlocking or other relationships with the Company that are subject to
disclosure under the Securities and Exchange Commission rules relating to proxy
statements. All decisions of the Compensation Committee relating to the salaries
and grade levels of the Company's Executive Officers are approved by the full
Board.
Set forth below is a report prepared by the members of the Compensation
Committee whose names appear below this report, addressing the Company's
compensation policies for 1997 as they affected the Company's executive
officers, including the Named Executives.
EXECUTIVE OFFICER COMPENSATION POLICIES
The Compensation Committee's executive compensation policies are designed
to:
- Provide incentives for achievement of the Company's annual and long-term
performance goals;
- Reinforce the common interest of management and the stockholders in
enhancing shareholder value;
- Reward individual initiative and achievement;
- Provide levels of compensation that are fair, reasonable and competitive
with comparable industrial companies; and
- Attract and retain qualified executives who are critical to the Company's
long-term success.
9
<PAGE> 14
At the 1995 Annual Meeting of Stockholders, the Board of Directors
proposed, and the stockholders overwhelmingly approved the 1995 Executive
Incentive Compensation Plan which the Board believes has provided an improved
basis for achieving these goals. The current compensation program is applicable
to all corporate and divisional officers of the Company and is composed
primarily of:
- Salary based upon grade levels that reflect the degree of responsibility
associated with the executive's position and the executive's past
achievement;
- Annual incentive compensation awarded under the 1995 Executive Incentive
Compensation Plan paid 60% in cash and 40% in the form of restricted
shares of Harsco common stock, based upon achievement of specific
financial objectives (return on capital, earnings per share, cash flow
provided by operations and sales growth) and strategic goals established
for the relevant business unit;
- Stock option grants under the 1995 Executive Incentive Compensation Plan
made annually by the Compensation Committee on the basis of the
Committee's evaluation of each unit's strategic planning and the
contribution of the executive, at its discretion with exercise prices
equal to the market price at the date of grant; and
- Various retirement and other benefits commonly found in similar
companies.
The Compensation Committee believes that the Company benefits from a broad
based executive compensation program that extends the program's incentives to
approximately 54 division officers in addition to the five executive officers
and four other corporate officers. However, as an executive's level of
responsibility increases, a greater portion of his or her potential total
compensation opportunity should be based on performance incentives and a lesser
portion on salary, causing greater variability in the individual's total
compensation from year to year. This is achieved under the Company's current
1995 Executive Incentive Compensation Plan by using the executive's numeric
grade level and annual salary as multipliers along with the proportion of target
achievement when computing annual incentive compensation awards.
The Compensation Committee also believes that as executives rise to
positions that can have a greater impact on the Company's performance, the
compensation program should place more emphasis on the value of the common
stock. This objective is met by paying a portion of the annual incentive
compensation in restricted shares of the Company's common stock, and granting
stock options for the Company's common stock. Under the 1995 Harsco Executive
Incentive Compensation Plan and the related Authorization, Terms and Conditions
of the Annual Incentive Awards, 60% of a participant's annual incentive
compensation award is paid in cash with the remaining 40% paid in the form of a
grant of restricted shares of Harsco common stock. Each participant is given the
opportunity to elect to receive the annual incentive compensation award all in
cash, subject to a 25% reduction in the total award amount. The restricted
shares are nontransferable by the officer for a period of three years from date
of grant. Furthermore, the restricted stock is subject to forfeiture by the
officer during the applicable restricted period in the event of the executive's
termination for reasons other than:
- normal retirement
- death
- full and permanent disability; or
- involuntary termination other than termination for cause as defined in
the Plan.
The Committee has the authority to accelerate the expiration of the
restriction and forfeiture provisions in its discretion. The Executive Incentive
Compensation Plan provides that the Committee may from time to time make special
incentive awards separate from the Plan, to corporate and division
10
<PAGE> 15
officers, including the executive officers, to provide additional performance
incentives and rewards. As reported in the Summary Compensation Table, the
Committee made such an award to the corporate officers, including the executive
officers in February 1998 for achievement of the strategy to successfully exit
the defense business.
With respect to stock options, the quantity granted to an individual in any
year is based upon the executive's grade level and the strategic planning
performance of the executive and the executive's business unit. The Company has
not reset the exercise price on any existing stock options in the past and, as a
matter of sound compensation policy, does not foresee doing so in the future.
On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 was
signed into law, making significant revisions to the United States tax laws.
This Act added a new provision in Section 162(m) of the Internal Revenue Code
that beginning in 1994, limits the deductibility of executive compensation for
individuals in excess of $1 million per year paid by publicly traded
corporations to the chief executive officer and the four other executives named
in the compensation table of the Proxy Statement. The Company has determined
that given the rates of compensation currently in effect and the exemption under
Internal Revenue Service regulations applicable to income derived from stock
options granted under the Harsco 1986 Stock Option Plan or the 1995 Executive
Incentive Compensation Plan, and the exemption applicable to the performance
based incentive compensation bonuses under the 1995 Executive Incentive
Compensation Plan, the Company should not be exposed to any nondeductibility of
executive compensation expense under Section 162(m) in the 1998 tax year. In
1995, the Company obtained stockholder approval of the 1995 Executive Incentive
Compensation Plan, which was designed to preserve the deductibility to the
extent possible, of executive compensation resulting from performance based
awards under that Plan. The Company is now seeking renewal of that approval
which, if adopted by the stockholders, will extend this exemption to the year
2003 from its current expiration date in 2000.
RELATIONSHIP OF PERFORMANCE TO COMPENSATION
The Company currently ties executive pay to corporate performance primarily
through the 1995 Executive Incentive Compensation Plan awards that are based
upon achievement of objectives adopted by the Compensation Committee, and stock
option grants which only provide realizable compensation through increases in
the stock price.
Incentive Compensation Plan
The opportunity for compensation under the 1995 Executive Incentive
Compensation Plan in effect for 1997 was dependent upon meeting the four
financial objectives and the specific strategic objectives established by the
Compensation Committee prior to the beginning of the plan year, for the
appropriate business unit. Under the 1995 Executive Incentive Compensation Plan,
80% of the total possible award is based on achievement of financial objectives
established by the Compensation Committee each year, and 20% is based on
attainment of strategic goals. The financial goals for 1997 were based upon
return on capital, earnings per share, cash flow provided by operations, and
sales growth.
No award will be made for achievement of only the minimum target, but
awards will begin to be earned as performance in each of the designated
objective categories rises above the minimum. Achieving target levels of
performance in all objectives results in an award that is 67% of the award for
achieving the maximum level of performance against all objectives, and the award
will continue to rise correspondingly as the achieved results approach the
maximum financial and strategic objective performance levels set by the
Compensation Committee.
11
<PAGE> 16
The Compensation Committee establishes minimum, target and maximum
financial objectives for the corporate office and each division for that year,
which will constitute 80% of the annual bonus criteria. The corporate officer
financial objectives for minimum, target and maximum achievement are established
based upon a consolidation of the goals for the eight operating divisions. Thus,
the incentive compensation awards of the corporate officers are closely related
to the overall performance of the divisions against their goals. The strategic
goals which constitute the other 20% of the evaluation criteria under the
current 1995 Executive Incentive Compensation Plan are established by the
Compensation Committee and are assigned various weights. The strategic goals set
for each business unit in 1997 involved achievement of various objectives
important to the profitable growth of the particular Harsco operating division
in such areas as safety, accounts receivable, new product introduction and
information technology system upgrades. The corporate officer awards are then
dependent on the degree of achievement based upon the average attainment of
strategic goals by the eight operating divisions. As previously discussed, 60%
of an executive participant's annual incentive compensation award is paid in
cash with the remaining 40% paid in the form of restricted shares of Harsco
common stock subject to the participant's opportunity to receive the award all
in cash with a 25% reduction in the total award.
The executive officers attained 45.7% of maximum achievement with respect
to the combined strategic goals. The Company's record financial performance
yielded an achievement factor of 89.8% for 1997 for the financial goals. The
combined achievement on strategic and financial goals resulted in each of the
executive officers earning 81% of the maximum annual incentive compensation for
1997.
Stock Options
As shown in the table that follows, the Compensation Committee granted
stock options to the executive officers on January 27, 1997 under the 1995
Executive Incentive Compensation Plan with an exercise price of $34.28 per
share, which was the market price on the date of grant. This Plan was approved
by the stockholders in 1995 and is used to make grants to other corporate and
division officers as well as the executive officers. The number of options
granted to each executive is determined by grade level and the Committee's
evaluation of the Strategic planning performance of the individual and the
individual's unit. Thus, the Chairman and Chief Executive Officer, Mr. Hathaway,
who has the highest grade level, received the largest award. The absolute
maximum stock option award as provided in the 1995 Plan is 50,000 shares for any
single participant in a calendar year. The Board of Directors has recommended
that the stockholders approve at the 1998 Annual Meeting an amendment to the
plan to raise this limitation to 150,000 shares.
The guidelines for the maximum annual number of options granted for each
grade level were established in 1995 based upon a recommendation from Towers
Perrin, a compensation consulting firm, and that firm's survey of the long-term
incentive compensation practices of 130 major United States companies. In
determining the January 27, 1997 grants, the Committee considered the number of
options previously granted to participants under the 1986 Stock Option Plan and
the 1995 Plan, and the aggregate number that would be outstanding upon approval
of the 1997 grants.
Salaries
The Compensation Committee made its regular annual review of salaries of
all corporate and division officers, including the Named Executives, at its
November 18, 1996 Committee meeting, and recommended salary increases which the
Board then approved for implementation on January 1, 1997.
Each year, the Compensation Committee establishes executive salary budgets
for corporate and division officers based upon survey data provided by a number
of major consulting firms. For 1997, the
12
<PAGE> 17
Committee approved a budget for salary increases which was within the range of
planned salary budgets indicated by the various surveys. The Committee then
adjusts the salary of each officer based upon the available salary budget, the
performance of each officer, comparison to other internal salaries and the
Company's salary range structure for various grade levels. The salary range
structure for various grade levels is also revised from time to time based upon
industry survey data provided by a number of major consulting firms. Based on
this information, the Committee, at its November 1996 meeting, approved a 5%
increase in the salary range structure for grade levels covering division
presidents and corporate officers. The last adjustment to the salary range
structure was made in 1994. The various industry compensation surveys considered
by the Committee are generally broad based surveys of companies selected by the
consulting firms which are not limited to the companies within the Dow Jones
Industrial-Diversified Index referenced elsewhere in the Proxy Statement, though
some of those companies may have been included in the surveys.
In 1996, compensation consultant Towers Perrin prepared an analysis of
competitive compensation levels and total direct compensation (defined as base
salary, annual incentives and long-term incentives in the form of cash and stock
option awards) for the Company's key executive positions. The analysis was based
on competitive data from Towers Perrin 1996 Executive Compensation Data Bank for
general industry companies with annual revenues between $1 and $3 billion. The
salary increases effective January 1, 1997 were based upon that analysis,
compensation survey information prepared by three other major consulting firms
and a review of the performance of each officer. The salary for the Chief
Executive Officer was substantially below the median in the Towers Perrin
analysis and below the median in each of the other compensation surveys. The
Chief Executive Officer salary remains below the median in the Towers Perrin
analysis and below the other survey medians even after the increase to $500,000
per annum which became effective January 1, 1997. The compensation for the other
executive officers was also below the Towers Perrin medians for those positions.
In preparation for future compensation adjustments, the Committee intends
to periodically review similar detailed survey data. In general, the Committee
strives to maintain total compensation packages which range from moderately
below to moderately above the industry medians.
Other Compensation
In February 1998, the Committee made special incentive compensation awards
to the corporate officers as reported in the Summary Compensation Table, for
achievement of the strategy to successfully exit the defense business.
The Company has certain other broad based employee benefit plans in which
the executive officers participate on the same terms as non-executive employees,
including health insurance, the Savings Plan and the term life insurance benefit
equal to two times the individual's salary. In addition, the executive officers
participate in the Supplemental Retirement Benefit Plan as described elsewhere
in this Proxy Statement, which supplements both the qualified pension plan and
the Company's 401(k) Savings Plan.
THE CHIEF EXECUTIVE OFFICER'S 1997 COMPENSATION
The incentive plan cash and restricted stock compensation, special
incentive compensation, stock options, and salary awarded or paid to Mr.
Hathaway with respect to 1997 are discussed above in this Report with respect to
amounts, and the factors considered by the Compensation Committee. Of the total
$1,156,100 in cash and restricted stock compensation paid to Mr. Hathaway for
1997 as reflected in the Summary Compensation Table, 56.75% was dependent upon
achieving performance objectives under the 1995 Executive Incentive Compensation
Plan. This is consistent with the Compensation
13
<PAGE> 18
Committee's view that those executives most able to affect the performance of
the Company should have a significant portion of their potential total
compensation opportunity at risk based upon Company performance. Those Company
performance objectives are composed of financial and strategic objectives. The
Compensation Committee believes that attainment of specific, measurable
financial and strategic goals is an important determinant of total return to
stockholders over the long-term and has the advantage of not being subject to
the period to period vagaries of the common stock price. However, the
Compensation Committee also believes that the Chief Executive Officer and other
officers should share in the gains or losses of common stock value experienced
by the stockholders in order to reinforce the alignment of their respective
interests. Therefore, the Compensation Committee utilizes stock option grants
and incentive compensation in the form of restricted shares of Harsco common
stock as important components of compensation. The Compensation Committee
believes that the combined effect of these compensation elements is to establish
strong incentives to achieve results which will provide stockholders with the
investment returns that they seek.
In summary, the Committee believes that the total compensation program
implemented in 1995 achieves the objective of providing meaningful and
appropriate rewards, recognizing both current performance contributions and the
attainment of long-term strategic business goals of critical importance to the
future growth of Harsco Corporation.
SUBMITTED BY THE MANAGEMENT DEVELOPMENT AND COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS:
R. F. Nation, Chairman
J. E. Marley
N. H. Prater
A. J. Sordoni, III
14
<PAGE> 19
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information concerning the compensation
awarded to, earned by or paid to the Named Executives for services rendered to
the Company in all capacities during each of the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------ ----------------------------------
AWARDS PAYOUTS
------------------------ -------
OTHER RESTRICTED SECURITIES ALL OTHER
NAME AND ANNUAL STOCK UNDERLYING LTIP COMPEN-
PRINCIPAL SALARY COMPENSA- AWARD(S) OPTIONS PAYOUTS SATION
POSITION YEAR ($) BONUS($) TION($) ($)(1) (#)(2) ($) ($)(3)
--------- ---- ------ -------- --------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
D.C. Hathaway(5)...... 1997 500,000 393,660 -0- 262,440 50,000 -0- 175,099
Chairman 1996 400,000 336,312 -0- 224,208 30,000 -0- 22,731
& Chief Executive 1995 400,000 357,696 -0- 238,464 30,000 154,980(4) 27,819
Officer
L.A. Campanaro(5)..... 1997 260,000 174,377 -0- 116,251 20,000 -0- 88,063
President & Chief 1996 244,900 175,402 -0- 116,935 20,000 -0- 12,537
Operating Officer 1995 227,100 172,996 -0- 115,330 20,000 79,916(4) 14,970
P.C. Coppock.......... 1997 217,000 145,538 -0- 97,025 20,000 -0- 85,979
Senior Vice 1996 208,000 148,974 -0- 99,316 20,000 -0- 10,811
President, Chief 1995 200,000 152,352 -0- 101,568 20,000 67,896(4) 12,930
Administrative
Officer, General
Counsel & Secretary
W.D. Etzweiler(5)..... 1997 315,000 211,264 -0- 140,843 20,000 -0- 89,712
Senior Vice 1996 244,900 175,402 -0- 116,935 20,000 -0- 12,537
President & Chief 1995 227,100 172,996 -0- 115,330 20,000 79,916(4) 14,970
Operating Officer
S.D. Fazzolari(5)..... 1997 130,000 64,444 -0- 42,962 8,000 -0- 35,850
Senior Vice 1996 122,800 65,008 -0- 43,338 8,000 -0- 5,679
President
& Chief Financial 1995 118,100 66,495 -0- 44,330 8,000 29,952(4) 6,203
Officer
</TABLE>
- - ---------------
(1) Represents 40% share of total annual incentive compensation award under the
terms of the 1995 Executive Incentive Compensation Plan. (The other 60%
share of the annual incentive compensation awards was paid in cash and
appears in the column entitled "Bonus"). One-half of the stock granted for
1995 and 1996 has a one year restriction from the date of grant and the
remaining one-half of the stock has a three year restriction from the date
of the grant. All stock granted for 1997 has a three year restriction.
During the period of restriction, the restricted shares can be voted and
dividends will be reinvested. The dividend reinvestment shares will be
restricted for the same period as the underlying shares. The restricted
shares awarded for the 1995 plan year were issued in February 1996 and the
restriction expired as to one-half of those shares in February 1997. The
restricted shares awarded for the 1996 plan year were issued in February
1997 and restrictions as to one-half of those shares expired in February
1998. The aggregate holdings of restricted shares, and market value as of
December 31, 1997, for the Named Executives is as follows: Mr. Hathaway --
10,467 shares with a value of $452,387; Mr. Campanaro -- 5,315 shares with a
value of $229,707; Mr. Coppock -- 4,572 shares with a value of $197,611; Mr.
Etzweiler -- 2,697 shares with a value of $116,560; and Mr.
Fazzolari -- 1,996 shares with a value of $86,250. The market value at
December 31, 1997, was $43.2188 per share which represents the average of
the high and low price on that date. Dividends on restricted holdings are
paid at the normal common stock rate. Of the aggregate restricted shares
issued in February 1997, restrictions lapsed on February 21, 1998
15
<PAGE> 20
for the Named Executives as follows: Mr. Hathaway -- 3,357.93 shares; Mr.
Campanaro -- 1,751.39 shares; Mr. Coppock -- 1,487.20 shares; Mr.
Etzweiler -- 873.79 shares and Mr. Fazzolari -- 649.76 shares.
(2) Represents stock options granted in the respective years. The Company
granted these options, relating to shares of its common stock, to employees,
including executive officers, of the Company under its 1986 Stock Option
Plan and 1995 Executive Incentive Compensation Plan (together, the "Plans").
The Company's Plans authorize the Compensation Committee to grant stock
options as well as stock appreciation rights to certain officers and
employees who in the discretion of the Compensation Committee significantly
impact upon the profitability of the Company. Options granted during a
particular year are not exercisable for twelve months following the date of
grant, unless a change in control of the Company occurs, nor are they
exercisable ten years after the date of grant. The exercise price per share
of options granted under the Plan was one hundred percent (100%) of the fair
market value of common stock at the date of grant.
(3) For the respective years, represents Company Savings Plan contributions and
certain Supplemental Retirement Benefit Plan contributions made on behalf of
the Named Executives. The Company maintains the Harsco Corporation Savings
Plan which includes the "Salary Reduction" feature afforded by Section
401(k) of the Internal Revenue Code. Eligible employees may authorize the
Company to contribute from 1% to 16% of their pre-tax compensation to the
Savings Plan. The Company makes matching contributions for the purchase of
common stock of the Company for the account of each participating employee
equal to 50% of the first 1% to 6% of such employee's "Salary Reduction"
contribution. Under the Supplemental Savings Benefit portion of the
Supplemental Retirement Benefit Plan, if the IRS-imposed limitations on
Section 401(k) Savings Plan contributions are reached by a Named Executive
for a given year, so that he is unable to make the maximum 6% of pre-tax
compensation "Salary Reduction" contribution that would be subject to the
Company's matching contributions under the Savings Plan, the Company will
make contributions on behalf of such Named Executive to the Supplemental
Savings Benefit portion of the Supplemental Retirement Benefit Plan in an
amount equal to the amount of the matching contributions that it would have
made under the Savings Plan if the Executive could have contributed the full
6% of his pre-tax compensation, less the amount of matching contributions
that the Company actually made for his benefit under the Savings Plan. Such
Company contributions to the Supplemental Retirement Benefit portion of the
Supplemental Retirement Benefit Plan are credited in the form of phantom
shares based upon the value of common stock on the date of the Company's
contributions. Dividends that would have been paid on common stock are
credited as additional phantom shares, and all phantom shares will
ultimately be paid out in cash based upon the value of shares of common
stock at the time of payment.
For 1997, includes a special cash bonus award for successful achievement of
the defense business exit strategy.
(4) Represents the payout of accrued long-term incentive compensation awards
earned in prior years under the 1986 Incentive Compensation Plan as a result
of termination of that Plan. Payments are for amounts accrued for the
incomplete three year Plan period ending in 1995 (relating to performance in
years 1993 and 1994) and the incomplete three-year Plan period ending in
1996 (relating to performance in 1994). Payments were approved by the
stockholders at the 1995 Annual Meeting of Stockholders in connection with
the adoption of the 1995 Executive Incentive Compensation Plan and were made
in May 1995.
(5) Indicates titles effective as of January 1, 1998. At December 31, 1997, Mr.
Hathaway's title was Chairman, President and Chief Executive Officer, Mr.
Campanaro's title was Senior Vice President and Chief Financial Officer and
Mr. Fazzolari's title was Vice President and Controller. Mr. Etzweiler
retired from the Company effective March 1, 1998.
16
<PAGE> 21
STOCK OPTIONS
The following table contains information concerning the number of stock
options granted to each Named Executive under the Company's 1995 Executive
Incentive Compensation Plan during the last fiscal year:
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION GRANT DATE PRESENT
NAME (#)(1) YEAR ($/SH) DATE VALUE($)(2)
---- ---------- ---------- -------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
D. C. Hathaway -- 50,000 17.6 34.28 1/26/07 326,000
Chairman & Chief Executive
Officer
L. A. Campanaro -- 20,000 7.0 34.28 1/26/07 130,400
President & Chief Operating
Officer
P. C. Coppock -- 20,000 7.0 34.28 1/26/07 130,400
Senior Vice President, Chief
Administrative Officer, General
Counsel & Secretary
W. D. Etzweiler -- 20,000 7.0 34.28 1/26/07 130,400
Senior Vice President & Chief
Operating Officer
S. D. Fazzolari -- 8,000 2.8 34.28 1/26/07 52,160
Senior Vice President & Chief
Financial Officer
</TABLE>
- - ---------------
(1) The Company granted these options, for shares of its common stock, to
employees, including executive officers, of the Company under its 1995
Executive Incentive Compensation Plan. The Company's 1995 Executive
Incentive Compensation Plan authorizes the Compensation Committee to grant
stock options to purchase common stock, as well as stock appreciation rights
to certain officers and employees who in the discretion of the Compensation
Committee significantly impact the profitability of the Company. Options
granted during a particular year are not exercisable for twelve months
following the date of grant, unless a change in control of the Company
occurs, nor are they exercisable ten years after the grant. The exercise
price per share of options granted under the 1995 Executive Incentive
Compensation Plan was one hundred percent (100%) of the fair market value of
common stock at the date of grant. There were no stock appreciation rights
granted in 1997.
(2) The fair value of the options granted during 1997 is estimated on the date
of grant using the binomial option pricing model. This estimate has been
developed for purposes of comparative disclosure and does not necessarily
reflect the Company's view of the value of the option. The estimated value
has been determined based upon the terms of the option grant, the common
stock price performance history and the Company's experience that its
options, on average, are exercised within four years of grant. Other
assumptions are: 16% expected stock volatility, 6.46% risk free interest
rate, a $0.80 dividend and a 5% rate of dividend increase.
17
<PAGE> 22
OPTION EXERCISES AND HOLDINGS
The following table sets forth information, with respect to the Named
Executives, concerning the exercise of options during fiscal year 1997 and
unexercised options at December 31, 1997:
AGGREGATED OPTION EXERCISES IN 1997
AND OPTION VALUES AT 12/31/97
<TABLE>
<CAPTION>
SHARES
ACQUIRED NUMBER OF SECURITIES VALUE OF UNEXERCISED
ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
EXERCISE REALIZED OPTIONS AT OPTIONS AT
NAME (#) ($)(1) 12/31/97 (#)(2) 12/31/97 ($)(3)
---- -------- -------- ---------------------- --------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
D. C. Hathaway --
Chairman & Chief Executive
Officer.......................... 60,748 1,050,666 30,000 50,000 412,464 446,940
L. A. Campanaro --
President & Chief Operating
Officer.......................... 34,917 709,424 27,815 20,000 451,121 178,776
Paul C. Coppock --
Senior Vice President, Chief
Administrative Officer, General
Counsel & Secretary.............. 17,838 376,600 50,134 20,000 924,433 178,776
W. D. Etzweiler --
Senior Vice President & Chief
Operating Officer................ 20,000 200,600 -0- 20,000 -0- 178,776
S. D. Fazzolari --
Senior Vice President & Chief
Financial Officer................ 5,400 87,086 16,000 8,000 282,240 71,510
</TABLE>
- - ---------------
(1) Represents the difference between the exercise price and the market price of
common stock on the date of exercise.
(2) Options granted during a particular year are not exercisable for twelve
months following the date of grant unless a change in control of the Company
occurs.
(3) Represents the difference between the exercise price and the market price of
common stock on December 31, 1997, multiplied by the number of in-the-money
unexercised options contained in the respective category. Average market
price at December 31, 1997 was $43.2188 per share. Options are in-the-money
when the market price of the underlying securities exceeds the exercise
price.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and certain of its officers to send reports of their ownership of
Harsco Corporation stock and changes in ownership to the Company and the
Securities and Exchange Commission (the "SEC"), The New York Stock Exchange,
Inc. and The Pacific Exchange, Inc. SEC regulations also require the Company to
identify in this Proxy Statement any person subject to this requirement who
failed to file any such report on a timely basis.
18
<PAGE> 23
STOCK PERFORMANCE GRAPH
The following performance graph compares the yearly percentage change in
the cumulative total stockholder return (assuming the reinvestment of dividends)
on the Company's common stock against the cumulative total return of the
Standard & Poor's MidCap 400 Index and the Dow Jones Industrial-Diversified
Index for the past five years. The graph assumes an initial investment of $100
on December 31, 1992 in the Company's common stock or in the underlying
securities which comprise each of those market indices. The information
contained in the graph is not necessarily indicative of future Company
performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG HARSCO CORPORATION, S&P MIDCAP 400 INDEX AND DOW JONES
INDUSTRIAL-DIVERSIFIED INDEX(1)
FISCAL YEAR ENDING DECEMBER 31
<TABLE>
<CAPTION>
DOW JONES
MEASUREMENT PERIOD HARSCO S&P MIDCAP 400 INDUSTRIAL-
(FISCAL YEAR COVERED) CORPORATION INDEX DIVERSIFIED
<S> <C> <C> <C>
1992 100.000 100.000 100.000
1993 111.044 113.950 122.191
1994 115.541 109.870 112.073
1995 169.479 143.860 146.763
1996 204.628 171.490 189.891
1997 263.044 226.800 248.911
</TABLE>
- - ---------------
(1) Peer companies included in the Dow Jones Industrial-Diversified Index are:
Aeroquip-Vickers Inc., Allied-Signal Inc., Cooper Industries Inc., Crane
Company Inc., Danaher Corporation, Dexter Corporation, Dover Corporation,
FMC Corporation, Illinois Tool Works, Inc., Ingersoll-Rand Company,
National Service Industries, Inc., Parker Hannifin Corporation, PPG
Industries Inc., Raychem Corporation, Stanley Works, Tenneco, Inc. and Tyco
International Ltd.
19
<PAGE> 24
RETIREMENT PLANS
The Company provides retirement benefits for each officer under the
Supplemental Retirement Benefit Plan ("Supplemental Plan"). All executive
officers are covered by the Supplemental Plan. The Supplemental Plan replaces
the 401(k) Company match lost due to government limitations on such
contributions. The replacement is in the form of phantom shares as more fully
described in footnote 3 on page 16. All executive officers are also covered by
the qualified pension plan. Each plan is a defined benefit plan providing for
normal retirement at age 65. Early retirement may be taken commencing with the
first day of any month following the attainment of age 55, provided at least 15
years of service have been completed. Early retirement benefits commencing prior
to age 65 are reduced. The Supplemental Plan also provides for unreduced pension
benefits if retirement occurs after age 62, provided at least 30 years of
service have been completed. The Supplemental Plan contains a provision
providing for a preretirement death benefit payable in a monthly benefit to a
beneficiary designated by the participant for participants who die after
qualifying for benefits. The Supplemental Plan also includes provisions which
fully vest participants upon termination of employment following a "change in
control" of the Company as defined in the Supplemental Plan.
Total pension benefits are based on final average compensation and years of
service. The normal retirement benefit under the Supplemental Plan is equal to a
total of .8% of final average compensation up to the "Social Security Covered
Compensation" as defined in the Supplemental Plan plus 1.6% of the final average
compensation in excess of the "Social Security Covered Compensation" multiplied
by up to 33 years of service, reduced by the benefits under the qualified plan.
Final average compensation is defined as the aggregate compensation (base salary
plus nondiscretionary incentive compensation) for the 60 highest consecutive out
of the last 120 months prior to date of retirement or termination of employment
for any reason prior to normal retirement date.
The following table shows estimated total annual pension benefits payable
to the executive officers of the Company under the qualified pension plan and
the Supplemental Plan, including the Named Executives upon retirement at age 65,
in various remuneration and year-of-service classifications, assuming the total
pension benefit was payable as a straight life annuity guaranteed for ten years
and retirement took place on January 1, 1998.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------
REMUNERATION(1) 10 15 20 25 30 35*
- - --------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
100,000................................... 13,510 20,265 27,020 33,774 40,529 44,582
200,000................................... 29,510 44,265 59,020 73,774 88,529 97,382
300,000................................... 45,510 68,265 91,020 113,774 136,529 150,182
400,000................................... 61,510 92,265 123,020 153,774 184,529 202,982
500,000................................... 77,510 116,265 155,020 193,774 232,529 255,782
600,000................................... 93,510 140,265 187,020 233,774 280,529 308,582
700,000................................... 109,510 164,265 219,020 273,774 328,529 361,382
800,000................................... 125,510 188,265 251,020 313,774 376,529 414,182
900,000................................... 141,510 212,265 283,020 353,774 424,529 466,982
1,000,000................................... 157,510 236,265 315,020 393,774 472,529 519,782
</TABLE>
- - ---------------
* The Supplemental Plan has a 33 year service maximum.
(1) Final average compensation for the Named Executives as of the end of the
last calendar
year is: Mr. Hathaway: $839,220; Mr. Campanaro: $459,510; Mr. Coppock:
$384,755; Mr. Etzweiler: $488,753 and Mr. Fazzolari: $188,353. The estimated
credited years of service for each Named Executive are as follows: Mr.
Hathaway: 31.5 years; Mr. Campanaro: 17.5 years; Mr. Coppock: 16.5 years;
Mr. Etzweiler: 31.5 years, and Mr. Fazzolari: 17.5 years.
20
<PAGE> 25
The Company does not provide retiree medical benefits to its executive
officers.
EMPLOYMENT AGREEMENTS WITH OFFICERS OF THE COMPANY
On September 25, 1989, the Board of Directors authorized the Company to
enter into employment agreements with certain officers, including Messrs.
Hathaway and Coppock, and subsequently with Messrs. Campanaro, Etzweiler and
Fazzolari (the "Agreements"). Pursuant to those authorizations, the Company
entered into individual Agreements with the Named Executive Officers. The
Agreements are designed as an inducement to retain the services of the officers
and provide for continuity of management during the course of any threatened or
attempted change in control of the Company. The Agreements are also intended to
ensure that, if a possible change in control should arise and the officer should
be involved in deliberations or negotiations in connection with the possible
change in control, the officer would be in a position to consider as objectively
as possible whether the possible change in control transaction is in the best
interests of the Company and its stockholders without concern for his position
or financial well-being. Should a change in control occur, the Agreements
provide for continuity of management following the change by imposing certain
obligations of continued employment on the officers.
Under the Agreements, the Company and the officers agree that in the event
of a change in control, such officer will remain in the Company's employ for a
period of three years from the date of the change in control (or to such
officer's normal retirement date, if earlier), subject to such officer's right
to resign during a thirty-day period commencing one year from the date of the
change in control or for good reason, as defined in the Agreement. If such
officer's employment terminates within three years after a change in control for
any reason other than cause as defined in the Agreements, resignation without
good reason as defined in the Agreements, or disability or death, such officer
will be paid a lump sum amount equal to such officer's average annual gross
income reported on Form W-2 for the most recent five taxable years prior to the
change in control, multiplied by the lesser of 2.99 or the number of whole and
fractional years left to such executive officer's normal retirement date, plus
interest. The payment may be subject to reduction to avoid adverse tax
consequences.
For purposes of the Agreements, a "change in control" would be deemed to
have occurred if (i) any person or group acquires 20% or more of the Company's
issued and outstanding shares of common stock; (ii) the members of the Board as
of the date of the Agreements (the "Incumbent Board") including any person
subsequently becoming a Director whose election, or nomination for election by
the Company's shareholders, was approved by a majority of the Directors then
comprising the Incumbent Board, cease to constitute a majority of the Board of
the Company as a result of the election of Board members pursuant to a contested
election; (iii) the stockholders approve of a reorganization, merger or
consolidation that results in the stockholders of the Company immediately prior
to such reorganization, merger or consolidation owning less than 50% of the
combined voting power of the Company; or (iv) the stockholders approve the
liquidation or dissolution of the Company or the sale of all or substantially
all of the Company's assets.
If such provisions under the applicable Agreements had become operative on
January 1, 1998, the Company would have been required to pay Messrs. Hathaway,
Campanaro, Coppock, Etzweiler and Fazzolari the following termination payments
based on compensation information available at December 31, 1997: $2,323,040,
$1,277,934, $1,064,213, $1,361,310, and $525,032, respectively.
On September 26, 1988, the Company entered into an agreement with Mr.
Hathaway which provides that for purposes of calculating his retirement
benefits, his years of service will be deemed to have commenced June 20, 1966.
21
<PAGE> 26
W.D. Etzweiler retired from his position of Senior Vice President & Chief
Operating Officer effective March 1, 1998. The Company entered into a Consulting
Agreement with Mr. Etzweiler dated March 1, 1998. This Agreement provides that
the Company pay a quarterly consulting fee of $10,000 to Mr. Etzweiler for one
year beginning March 1, 1998 and ending February 28, 1999. The Company is also
providing certain medical benefits to Mr. Etzweiler until he reaches age 65.
APPROVAL OF THE AMENDMENT TO THE 1995 EXECUTIVE INCENTIVE
COMPENSATION PLAN AND REAPPROVAL OF RELATED PLAN TERMS
REASONS FOR AMENDMENT AND STOCKHOLDER APPROVAL
As discussed above in the "Board Compensation Committee Report on Executive
Compensation," the Company's 1995 Executive Incentive Compensation Plan, as
amended (the "1995 Plan"), is an important means by which the Company ties the
major part of executive officers' compensation to the performance of the
Company. Performance-based compensation under the 1995 Plan for executive
officers currently includes annual incentive awards, which when earned are paid
out in a combination of cash and restricted stock, and options and other
long-term awards based on the Company's common stock. Over the past three years,
such awards under the 1995 Plan have provided strong motivation to executives to
achieve performance objectives set by the Compensation Committee, and have
placed strong emphasis on the building of value for all stockholders.
The Board of Directors has concluded that, to ensure that the 1995 Plan
will fulfill its purposes in the future, an amendment to the Plan adopted by the
Board should be approved by stockholders, and certain related terms of the Plan
should be reapproved by stockholders. The amendment and such stockholder
approval are intended to enable the Company to qualify certain compensation
under the 1995 Plan as "performance-based compensation" for purposes of Section
162(m) of the Internal Revenue Code (the "Tax Code"), so that the Company will
be entitled to a tax deduction without any limitation under Section 162(m).
Section 162(m) of the Tax Code, which became effective in 1994, limits a
public company's tax deductions for compensation to the chief executive officer
and the four other most highly compensated executive officers in a given year
(the "Named Executives"). Under Section 162(m), the Company can claim deductions
for a maximum of $1 million of compensation to such a Named Executive, except
that compensation that qualifies as "performance-based" remains fully deductible
without regard to the $1 million limit. Under regulations adopted by the
Internal Revenue Service, compensation can qualify as "performance-based" if it
is payable only upon achievement of pre-established performance objectives under
a plan as to which stockholders have approved the terms of eligibility, the
business criteria that are used in setting performance objectives, and
limitations on the amount of compensation that may be earned by each Named
Executive, and other requirements are met. In response to the new law, the
Company developed the 1995 Plan in late 1994, and the Plan was approved by
stockholders in April 1995.
The Board has now amended the 1995 Plan, subject to stockholder approval,
to increase the "per-person" limitation on compensation. This limitation would
be increased, in the case of annual incentive awards, from $800,000 to
$2,000,000 paid out in any one year, and in the case of stock options and stock
appreciation rights ("SARs"), from 50,000 to 150,000 granted in any one year
(subject to adjustment for stock splits and other corporate events). The value
of restricted stock granted in settlement of an annual incentive award is
counted against the dollar limitation at the time of grant. The Board has
concluded that the current provision limits the ability of the Compensation
Committee to structure annual incentive awards under the 1995 Plan that link a
greater portion of an executive's total
22
<PAGE> 27
compensation to annual performance. Although the limitations under the 1995 Plan
do not preclude payments of other compensation outside of the 1995 Plan, the
Board believes that the performance-based awards under the Plan have been
effective in the past, and should continue to be effective in the future, in
providing a direct and substantial incentive for executives to expend their
maximum efforts for the success of the Company's business. In addition, the
Board has been advised that the current level of per-person limitations is
substantially more restrictive than the levels set in plans of issuers
comparable to the Company. Overly restrictive limits could impair the
effectiveness of the 1995 Plan in helping the Company attract and retain high
quality executives who are essential to the Company's growth and success.
The IRS regulations under Section 162(m) provide that stockholder approval
is required of the general business criteria upon which performance objectives
are based. In the case of annual incentive awards under the 1995 Plan, the
Compensation Committee may set performance goals based upon annual return on
capital, annual earnings per share, annual cash flow provided by operations,
annual sales, and strategic business criteria such as specified sales, market
penetration, geographic business expansion goals, cost targets, safety goals,
goals relating to acquisitions or divestitures, research and development and
product development. Since stockholder approval of general business criteria
qualifies annual incentive awards for a period of approximately five years,
stockholders are being requested to reapprove these terms of the 1995 Plan,
which currently expire in 2000. If reapproved, the annual incentive awards will
meet the stockholder approval requirements under Section 162(m) until 2003.
Stockholder approval of the performance goal inherent in stock options and SARs
(increases in the market price of stock) is not subject to a time limit under
Section 162(m), therefore, the performance goal relating to such awards is not
subject to reapproval.
TEXT OF AMENDMENT
The amendment to the 1995 Plan adopted by the Board and to be voted upon by
stockholders revised Section 4(b) of the Plan as follows (added language
underscored, deleted language overstruck):
(b) Annual Individual Limitations. During any calendar year, no
Participant may be granted Options and SARs under the Plan with respect to
more than 50,000 150,000 shares of Stock. In addition, the maximum value of
any Annual Incentive Award settled during any calendar year (including the
value of any Restricted Stock granted in settlement thereof)shall not
exceed $800,000 $2,000,000.
The full text of the 1995 Plan as currently in effect is included as an exhibit
to the Company's Annual Report on Form 10-K for the year ended December 31,
1996, which may be accessed through the SEC's "Edgar Archives" at the SEC's
Internet web site, http://www.sec.org.
DESCRIPTION OF THE 1995 PLAN
The following is a brief description of the material features of the 1995
Plan. Such description is qualified in its entirety by reference to the full
text of the 1995 Plan.
General. The flexible terms of the 1995 Plan provide for grants of options
and SARs, a variety of other stock-related awards, and annual incentive awards
that will be settled in part in cash and in part by the grant of restricted
stock ("Awards"). The 1995 Plan is intended to provide flexible terms to permit
the Compensation Committee (or other Board committee that may administer the
1995 Plan) (the "Committee") to enter into compensatory arrangements that
promote the compensation goals and policies discussed above in the "Board
Compensation Committee Report on Executive Compensation."
23
<PAGE> 28
Shares Subject to the 1995 Plan; Limitations and Adjustments. Under the
1995 Plan, a total of 4,000,000 shares of the Company's common stock ("Shares")
were reserved for issuance to participants in connection with Awards, of which
982,414 shares are currently subject to outstanding Awards and 3,017,586 other
shares remain available. THE AMENDMENT MAKES NO CHANGE IN THE NUMBER OF SHARES
RESERVED OR AVAILABLE UNDER THE 1995 PLAN, and stockholders are not being asked
to approve any increase in the number of shares reserved or available. Shares
subject to a forfeited or expired Award or to an Award that is settled in cash
or otherwise terminated without issuance of Shares to the participant again
become available under these limitations, but Shares withheld by the Company to
satisfy withholding tax obligations are treated as issued to the participant
under the 1995 Plan. Shares issued under the 1995 Plan may be either newly
issued Shares or treasury Shares. On March 6, 1998, the last reported sale price
of Shares in New York Stock Exchange Composite Transactions was $43.875 per
Share. The annual per-person limitations under the 1995 Plan are discussed
above.
The Committee is authorized to adjust the number and kind of Shares subject
to the aggregate Share limitations and annual limitations under the 1995 Plan
and subject to outstanding Awards (including adjustments to exercise prices of
options and other affected terms of Awards) in the event that a dividend or
other distribution (whether in cash, Shares, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or Share exchange, or other
similar corporate transaction or event affects the Shares such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of participants under the 1995 Plan. The Committee is also authorized to
adjust performance conditions and other terms of Awards in response to these
kinds of events or to changes in applicable laws, regulations, or accounting
principles, except that adjustments to performance conditions relating to annual
incentive awards must conform to the requirements of Code Section 162(m).
Eligibility. Executive officers and other key employees of the Company and
its subsidiaries, including any director or officer who is also an employee, are
eligible to be granted Awards under the 1995 Plan. At present, approximately 65
persons would be considered to be eligible for Awards under the 1995 Plan.
Administration. The 1995 Plan is administered by the Committee. Subject to
the terms and conditions of the 1995 Plan, the Committee is authorized to select
participants, determine the type and number of Awards to be granted and the
number of Shares to which Awards will relate, specify times at which Awards will
be exercisable or settled (including performance conditions that may be required
as a condition thereof), set other terms and conditions of such Awards,
prescribe forms of Award agreements, interpret and specify rules and regulations
relating to the 1995 Plan, and make all other determinations which may be
necessary or advisable for the administration of the 1995 Plan. Nothing in the
Plan precludes the Committee from time to time authorizing payment of any other
compensation, including bonuses based on performance, to corporate and division
officers, including the executive officers. The 1995 Plan provides that
Committee members shall not be personally liable, and shall be fully
indemnified, in connection with any action, determination, or interpretation
taken or made in good faith under the 1995 Plan.
Stock Options and SARs. The Committee is authorized to grant stock
options, including both incentive stock options which can result in potentially
favorable tax treatment to the participant ("ISOs") and nonqualified stock
options (i.e., options not qualifying as ISOs), and SARs entitling the
participant to receive the excess of the fair market value of a Share on the
date of exercise over the grant price of the SAR. The exercise price per Share
subject to an option and the grant price of an SAR is determined by the
Committee, but must not be less than the fair market value of a Share on the
date of grant. The maximum term of each option or SAR, the times at which each
option or SAR will be exercisable, and provisions requiring forfeiture of
unexercised options at or following termination of employment generally
24
<PAGE> 29
is fixed by the Committee, except no option or SAR may have a term exceeding ten
years. Options may be exercised by payment of the exercise price in cash,
Shares, outstanding Awards, or other property (possibly including notes or
obligations to make payment on a deferred basis, such as through "cashless
exercises") having a fair market value equal to the exercise price, as the
Company may determine from time to time. Methods of exercise and settlement and
other terms of the SARs are determined by the Committee. SARs granted under the
1995 Plan may include "limited SARs" exercisable for a stated period of time
following a "change in control" of the Company, as discussed below.
Restricted and Deferred Stock. The Committee is authorized to grant
restricted stock and deferred stock. Restricted stock is a grant of Shares which
may not be sold or disposed of, and which may be forfeited in the event of
certain terminations of employment, prior to the end of the specified restricted
period. The restricted period generally is established by the Committee, but
restricted stock must be forfeitable for at least three years, in the event of
voluntary termination of employment by the participant or involuntary
termination by the Company for cause, if the grant or lapse of restrictions is
not conditioned upon achievement of a performance objective. A participant
granted restricted stock generally has all of the rights of a stockholder of the
Company, including the right to vote the Shares and to receive dividends
thereon, unless otherwise determined by the Committee. An Award of deferred
stock confers upon a participant the right to receive Shares at the end of a
specified deferral period, subject to possible forfeiture of the Award in the
event of certain terminations of employment prior to the end of a specified
restricted period (which restricted period need not extend for the entire
duration of the deferral period). Prior to settlement, an Award of deferred
stock carries no voting or dividend rights or other rights associated with Share
ownership (although dividend equivalents may be granted, as discussed below).
Annual Incentive Awards. The Committee is authorized to grant annual
incentive awards, in the form of cash and/or restricted stock, upon achievement
of preestablished performance objectives during a specified one-year period. As
stated above, annual incentive awards granted to Named Executives are intended
to constitute "performance-based compensation" not subject to the limitation on
deductibility under Code Section 162(m). The Committee generally must establish
the performance objectives, amounts payable, other terms of settlement, and all
other terms of such Awards not later than the first quarter of the Company's
fiscal year.
The performance objectives to be achieved as a condition of settlement of
annual incentive awards will consist of (i) two or more business criteria, (ii)
minimum, targeted and maximum levels of performance with respect to each such
business criteria, and (iii) amounts payable upon achievement of such levels of
performance and at other levels of performance between the specified minimum and
maximum levels. In the case of participants expected to be Named Executives, the
business criteria used must be two or more of those specified in the 1995 Plan,
which are discussed above, although for other participants the Committee may
specify other business criteria. Subject to the requirements of the 1995 Plan,
the Committee will determine other annual incentive award terms, including the
required levels of performance with respect to the business criteria, the
corresponding amounts payable upon achievement of such levels of performance
(subject to per-person limits), and the extent to which such Awards will be
settled in cash and in restricted stock.
If restricted stock is granted in settlement of an annual incentive award
in respect of a given performance year, 50% of such restricted stock shall have
a restricted period ending not earlier than the end of the year following such
performance year and 50% of such restricted stock shall have a restricted period
ending not earlier than the end of the third year following such performance
year. In the event of the participant's voluntary termination of employment or
involuntary termination by the Company for "cause" prior to the end of the
restricted period, such restricted stock will be forfeited.
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<PAGE> 30
Dividend Equivalents. The Committee is authorized to grant dividend
equivalents conferring on participants the right to receive, currently or on a
deferred basis, cash, Shares, other Awards, or other property equal in value to
dividends paid on a specific number of Shares. Dividend equivalents may be
granted on a free-standing basis or in connection with another Award, may be
paid currently or on a deferred basis, and, if deferred, may be deemed to have
been reinvested in additional Shares, Awards, or other investment vehicles
specified by the Committee.
Bonus Stock and Awards in Lieu of Cash Obligations. The Committee is
authorized to grant Shares as a bonus free of restrictions or to grant Shares or
other Awards in lieu of Company obligations to pay cash under other plans or
compensatory arrangements, subject to such terms as the Committee may specify.
Other Terms of Awards. Awards may be settled in cash, Shares, other
Awards, or other property, in the discretion of the Committee. The Committee may
require or permit participants to defer the settlement of all or part of an
Award in accordance with such terms and conditions as the Committee may
establish, including payment or crediting of interest or dividend equivalents on
deferred amounts, and the crediting of earnings, gains, and losses based on
deemed investment of deferred amounts in specified investment vehicles. The
Committee is authorized to place cash, Shares, or other property in trusts or
make other arrangements to provide for payment of the Company's obligations
under the 1995 Plan. The Committee may condition any payment relating to an
Award on the withholding of taxes and may provide that a portion of any Shares
or other property to be distributed will be withheld (or previously acquired
Shares or other property surrendered by the participant) to satisfy withholding
and other tax obligations. Awards granted under the 1995 Plan generally may not
be pledged or otherwise encumbered and are not transferable except by will or by
the laws of descent and distribution, or to a designated beneficiary upon the
participant's death, except the Committee may permit transfers for estate
planning purposes.
Awards under the 1995 Plan are generally granted without a requirement that
the participant pay consideration in the form of cash or property for the grant
(as distinguished from the exercise), except to the extent required by law. The
Committee may, however, grant Awards in substitution for other Awards under the
1995 Plan, awards under other Company plans, or other rights to payment from the
Company, and may grant Awards in addition to and in tandem with such other
Awards, awards, or rights as well.
Acceleration of Vesting. The Committee may, in its discretion, accelerate
the exercisability, the lapsing of restrictions, or the expiration of deferral
periods of any Award (subject to certain limitations relating to restricted
stock, discussed above), and such accelerated exercisability, lapse, and
expiration shall occur automatically in the case of a "change in control" of the
Company (including cash settlements of SARs and "limited SARs" which may be
exercisable only in the event of a change in control). Subject to certain
exceptions, the 1995 Plan defines a "change in control" as (i) any person
becoming a beneficial owner of securities representing 20% or more of the
outstanding voting power of the company's voting securities, (ii) members of the
Board serving at the beginning of any two-year period, together with members
first elected in such period with the approval of two-thirds of the original
members and new members previously so approved, ceasing to constitute at least a
majority of the Board, or (iii) a transaction occurring which would be required
to be reported as a "change in control" under specified Securities and Exchange
Commission disclosure rules.
Amendment and Termination of the 1995 Plan. The Board of Directors may
amend, alter, suspend, discontinue, or terminate the 1995 Plan or the
Committee's authority to grant Awards without further stockholder approval,
except stockholder approval must be obtained if required by law or regulation or
under the rules of any stock exchange or automated quotation system on which the
Shares are then listed or quoted. Thus, stockholder approval, for example, will
be required for any material increase in the
26
<PAGE> 31
number of Shares available for award to executive officers under the 1995 Plan,
but will not necessarily be required for amendments which might increase the
cost of the 1995 Plan or broaden eligibility. Stockholder approval will not be
deemed to be required under laws or regulations, such as those relating to ISOs,
that condition favorable treatment of participants on such approval, although
the Board may, in its discretion, seek stockholder approval in any circumstance
in which it deems such approval advisable. Unless earlier terminated by the
Board, the 1995 Plan will terminate at such time as no Shares remain available
for issuance under the 1995 Plan and the Company has no further rights or
obligations with respect to outstanding Awards under the 1995 Plan.
Effect of Stockholder Approval on Awards. All Awards granted to date have
been granted under the 1995 Plan as currently in effect, and therefore such
Awards will be unaffected by the action of stockholders relating to the 1995
Plan at the 1998 Annual Meeting of Stockholders. Annual incentive awards and
stock options granted in the 1995-1997 period to the Named Executives as of
December 31, 1997, are shown above in the Summary Compensation Table, and other
information relating to such Awards is set forth in the "Board Compensation
Committee Report on Executive Compensation" and under the caption "STOCK
OPTIONS" above. The only annual incentive award for the 1998 performance year
that might be directly affected by the vote of stockholders is the annual
incentive award for Mr. Hathaway (which would be paid in 1999). If stockholders
decline to approve the amendment to the 1995 Plan, then that such Award will be
subject to the current limitation of $800,000.
The following table sets forth the maximum dollar value of annual incentive
awards authorized under the 1995 Plan in respect of the 1998 performance year
that may be awarded to the persons who were Named Executives and specified
groups of executive officers and employees under the current terms of the Plan
and the proposed revised terms. The Committee has established various
performance objectives for 1998 for determination of such annual incentive
awards. The terms of the annual incentive award authorization for 1998 is
similar to that for 1997, as discussed above in the "Board Compensation
Committee Report on Executive Compensation":
REVISED PLAN BENEFITS
1995 EXECUTIVE INCENTIVE COMPENSATION PLAN
<TABLE>
<CAPTION>
PROPOSED
CURRENT PLAN: AMENDMENT:
MAXIMUM DOLLAR VALUE MAXIMUM DOLLAR VALUE
OF ANNUAL INCENTIVE OF ANNUAL INCENTIVE
NAME AND POSITION AWARDS FOR 1998* AWARDS FOR 1998*
- - ----------------- -------------------- --------------------
<S> <C> <C>
D.C. Hathaway, Chairman and Chief Executive Officer... $ 800,000 $ 870,000
L.A. Campanaro, President and Chief Operating
Officer............................................. 487,500 487,500
P.C. Coppock, Senior Vice President, Chief
Administrative Officer, General Counsel and
Secretary........................................... 305,394 305,394
W.D. Etzweiler, Senior Vice President and Chief
Operating Officer................................... -0- -0-
S.D. Fazzolari, Senior Vice President and Chief
Financial Officer................................... 248,400 248,400
All Executive Officers as a Group (5 in number)....... 1,841,294 1,911,294
All Other Employees (including current officers who
are not executive officers)......................... 585,378 585,378
</TABLE>
- - ---------------
27
<PAGE> 32
* Represents dollar value of payout in the event of achievement of performance
objectives required for maximum payout. Achievement of targeted performance
levels will result in payout of 67% of maximum dollar value, and performance
that fails to meet minimum performance levels will result in no payout.
In the event that stockholders do not approve the proposal relating to the
1995 Plan, annual incentive awards to Named Executives under the 1995 Plan will
not be granted from and after 2000 to the extent necessary so that the vote of
stockholders at the 1998 Annual Meeting meets the requirements of Treasury
Regulation 1.162-27(e)(4).
Federal Income Tax Implications of the 1995 Plan. The following is a brief
description of the Federal income tax consequences generally arising with
respect to Awards under the 1995 Plan.
The grant of an option or SAR will create no tax consequences for the
participant or the Company. A participant will not have taxable income upon
exercising an ISO (except that the alternative minimum tax may apply). Upon
exercising an option other than an ISO, the participant must generally recognize
ordinary income equal to the difference between the exercise price and fair
market value of the freely transferable and nonforfeitable Shares acquired on
the date of exercise, and upon exercising an SAR, the participant must generally
recognize ordinary income equal to the cash or the fair market value of the
freely transferable and nonforfeitable Shares received.
Upon a disposition of Shares acquired upon exercise of an ISO before the
end of the applicable ISO holding periods, the participant must generally
recognize ordinary income equal to the lesser of (i) the fair market value of
the Shares at the date of exercise of the ISO minus the exercise price or (ii)
the amount realized upon the disposition of the ISO shares minus the exercise
price. Otherwise, a participant's disposition of Shares acquired upon the
exercise of an option or SAR generally will result in short-term or long-term
capital gain or loss measured by the difference between the sale price and the
participant's tax basis in such Shares (generally, the exercise price plus any
amount previously recognized as ordinary income in connection with the exercise
of the option or SAR).
The Company generally will be entitled to a tax deduction equal to the
amount recognized as ordinary income by the participant in connection with
options and SARs. The Company generally is not entitled to a tax deduction
relating to amounts that represent a capital gain to a participant. Accordingly,
the Company will not be entitled to any tax deduction with respect to an ISO if
the participant holds the Shares for the applicable ISO holding periods prior to
disposition of the Shares.
With respect to Awards granted under the 1995 Plan that may be settled
either in cash or in Shares or other property that is either not restricted as
to transferability or not subject to a substantial risk of forfeiture, the
participant must generally recognize ordinary income equal to the cash or the
fair market value of Shares or other property received. Except as discussed
below, the Company generally will be entitled to a deduction for the same
amount. With respect to Awards involving Shares or other property that is
restricted as to transferability and subject to a substantial risk of
forfeiture, the participant must generally recognize ordinary income equal to
the fair market value of the Shares or other property received at the first time
the Shares or other property becomes transferable or not subject to a
substantial risk of forfeiture, whichever occurs earlier. Except as discussed
below, the Company will be entitled to a deduction in an amount equal to the
ordinary income recognized by the participant. A participant may elect to be
taxed at the time of receipt of Shares or other property rather than upon lapse
of restrictions on transferability or the substantial risk of forfeiture, but if
the participant subsequently forfeits such Shares or other property he would not
be entitled to any tax deduction, including as a capital loss, for the value of
the Shares or property on which he previously paid tax. The participant must
file such election with the Internal Revenue Service within 30 days of the
receipt of the Shares of other property.
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<PAGE> 33
The foregoing discussion, which is general in nature, is intended for the
information of stockholders considering how to vote at the Annual Meeting and
not as tax guidance to participants in the 1995 Plan. Different tax rules may
apply, including in the case of variations in transactions that are permitted
under the 1995 Plan (such as payment of the exercise price of an option by
surrender of previously acquired Shares). This discussion does not address the
effects of other federal taxes (including possible "golden parachute" excise
taxes) or taxes imposed under state, local, or foreign tax laws. Accordingly,
participants are urged to consult a tax advisor as to their individual
circumstances.
Section 162(m) of the Tax Code generally disallows the Company's tax
deduction for compensation to Named Executives in excess of $1,000,000 each in
any tax year. Compensation that qualifies as "performance-based compensation" is
excluded from this deductibility cap, and therefore remains fully deductible
regardless of amount. As discussed above, the Company intends that options and
SARs granted with an exercise price or grant price at least equal to 100% of
fair market value of the underlying Shares at the date of grant, annual
incentive awards to employees the Committee expects to be Named Executives at
the time compensation is received under such Awards and restricted stock granted
as a payout for such annual incentive awards qualify as such "performance-based
compensation." A number of requirements must be met in order for particular
compensation to so qualify, however, so there can be no assurance that such
compensation under the 1995 Plan will be fully deductible under all
circumstances. In addition, other Awards under the 1995 Plan, such as restricted
stock not awarded in settlement of an annual incentive award and deferred stock
and certain bonus stock, generally will not so qualify, so that compensation
paid to Named Officer in connection with such Awards could be subject to Section
162(m)'s $1 million deductibility cap.
Vote Required. Adoption of the proposal to approve the amendment to the
1995 Plan and reapprove related 1995 Plan terms requires the affirmative vote of
holders of a majority of the shares present in person or by proxy and entitled
to vote on the subject matter at the Annual Meeting.
The Board of Directors unanimously recommends that the stockholders vote
FOR this proposal.
APPROVAL OF INDEPENDENT ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee, has
designated Coopers & Lybrand L.L.P., as independent accountants to audit the
financial statements for the fiscal year ending December 31, 1998, subject to
stockholder approval. This firm has audited the financial statements of the
Company and its predecessors since 1929. Although neither the Restated
Certificate of Incorporation and By-laws nor the General Corporation Law of the
State of Delaware, the State of incorporation, requires the election or approval
of the selection of independent accountants, the Board of Directors desires that
the selection of independent accountants be approved by the stockholders. Such
designation of Coopers & Lybrand L.L.P. will be submitted to the Annual Meeting
for confirmation or rejection, and, in the absence of contrary direction, it is
intended that Proxies in the accompanying form will be voted in favor of
confirmation. A representative of Coopers & Lybrand L.L.P. will attend the
Annual Meeting, with the opportunity to make a statement and answer questions of
stockholders.
If this proposal is not approved by a majority of the shares entitled to
vote at the Annual Meeting present in person or by proxy, the appointment of the
independent accountants will be reevaluated by the Board of Directors. However,
due to the difficulty and expense of making any substitution of accountants long
after the beginning of the current year, it is contemplated that the appointment
for the fiscal year ending December 31, 1998, will be permitted to stand unless
the Board finds other good reasons for making a change. The Board will then make
an independent business judgment as to whether to seek new independent
accountants for the fiscal year ending 1999.
29
<PAGE> 34
The Audit Committee of the Company's Board of Directors, at its meeting
held on August 26, 1997, reviewed and approved the fee estimate for the annual
audit of the Company's fiscal 1997 financial statements and, taking into
consideration the possible effect of non-audit services on the accountants'
independence, also approved the type of non-audit services to be rendered in
such year.
The Board of Directors unanimously recommends that the stockholders vote
FOR this proposal.
OTHER MATTERS
The cost of this solicitation of Proxies will be borne by the Company. In
addition to solicitation by use of mail, employees of the Company may solicit
Proxies personally or by telephone or facsimile but will not receive additional
compensation for these services. Arrangements may be made with brokerage houses,
custodians, nominees and fiduciaries to send Proxies and Proxy materials to
their principals and the Company may reimburse them for their expense in so
doing. The Company has retained Morrow & Co. to assist in the solicitation at a
cost that is not expected to exceed $9,000 plus reasonable out-of-pocket
expenses.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR PRESENTATION AT
1999 ANNUAL MEETING OF STOCKHOLDERS
If a stockholder of the Company wishes to submit a proposal for
consideration at the 1999 Annual Meeting of Stockholders, such proposal must be
received at the executive offices of the Company no later than November 23,
1998, to be considered for inclusion in the Company's Proxy Statement and form
of Proxy relating to the 1999 Annual Meeting. Although a stockholder proposal
received after such date will not be entitled to inclusion in the Company's
Proxy Statement and form of Proxy, a stockholder can submit a proposal for
consideration at the 1999 Annual Meeting in accordance with the Company's By-
laws if written notice is given to the Secretary of the Company not less than 60
days nor more than 90 days prior to the Meeting. In the event that the Company
gives less than 70 days notice of the Meeting date to stockholders, the
stockholder must give notice of the proposal within ten days after the mailing
of notice or announcement of the Meeting date. In order to nominate a candidate
for election as a Director at the 1999 Annual Meeting, a stockholder must
provide written notice and supporting information to the Secretary of the
Company by personal delivery or mail not later than January 30, 1999.
HARSCO CORPORATION
/s/ Paul C. Coppock
Paul C. Coppock
Senior Vice President,
Chief Administrative Officer,
General Counsel and Secretary
March 23, 1998
30
<PAGE> 35
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE Please mark
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER, your votes X
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR as indicated
PROPOSALS 1, 2 AND 3. MANAGEMENT RECOMMENDS A VOTE FOR in the example
PROPOSALS 1, 2 AND 3.
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS
<S> <C> <C> <C>
FOR all nominees WITHHOLD NOMINEES: L.A. Campanaro, R.L. Kirk, 3. Appointment of Coopers & Lybrand
listed to the right AUTHORITY J.E. Marley and J.I. Scheiner L.L.P. as the independent
(except as marked to to vote for all nominees (INSTRUCTION: To withhold authority accountants of the Company.
the contrary) listed to the right to vote for any individual nominee,
write that nominee's name in the FOR AGAINST ABSTAIN
space provided below.)
------------------------------------
Approval of a proposed amendment to the 1995 Executive Incentive Please sign exactly as name appears
Compensation Plan and reapproval of related Plan terms. to the left. When shares are held
by joint tenants, both should sign.
FOR AGAINST ABSTAIN When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
a corporation, please sign in full
corporate name by President or other
authorized officer. If a partner-
ship, please sign in partnership
name by authorized person.
Dated:_____________________, 1998
__________________________________
(Signature)
__________________________________
(Signature if held jointly)
PLEASE MARK, SIGN, DATE AND RETAIN
THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* FOLD AND DETACH HERE *
ANNUAL MEETING OF
HARSCO CORPORATION STOCKHOLDERS
Wednesday April 29, 1998
10:00 a.m.
The Radisson Penn Harris
Hotel and Convention Center
Routes 11 and 15 at Erford Road
Camp Hill, Pennsylvania
<PAGE> 36
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
HARSCO CORPORATION
The undersigned hereby appoints R.F. Nation, A.J. Sordoni, III and R.C.
Wilburn proxies, each with power to act without the other and with power of
substitution, and hereby authorizes them to represent and vote, as designated
on the other side and otherwise in their discretion, all the shares of stock of
Harsco Corporation standing in the name of the undersigned with all powers
which the undersigned would possess if present at the Annual Meeting of
Stockholders of the Company to be held April 29, 1998 or any adjournment
thereof.
(Continued, and to be marked, dated and signed on the other side)
FOLD AND DETACH HERE
[HARSCO LOGO] Annual
Meeting of
Stockholders
April 29, 1998 10:00 a.m.
The Radisson Penn Harris
Hotel and Convention Center
Routes 11 and 15 at Erford Road
Camp Hill, Pennsylvania
